Clearwire CFO lays out trump card: Capacity

Clearwire finance chief Hope Cochran laid out the company's trump card at an investor conference yesterday: Operators need capacity, and Clearwire has it in spades.

"People are looking for that capacity, and there's not that many places to go," Cochran said Thursday at the Goldman Sachs TMT Leveraged Finance conference in New York City.

Clearwire owns 160 MHz of spectrum in the country’s top 100 markets, giving it ample headroom for additional data traffic at a time when other wireless providers are running short on spectrum.

The company plans to build a TD-LTE network over high-traffic areas of its current WiMAX network, and then sell LTE access on a wholesale basis to spectrum-strapped operators that need to add capacity to their mobile broadband networks.

Operators’ thirst for spectrum has repeatedly risen to the surface in recent months, after AT&T's merger with T-Mobile USA fell apart and Verizon Wireless took a sizeable chunk of AWS spectrum off the market by agreeing to buy it from four cable operators for $3.9 billion.

Along with the continued setbacks that have hammered LightSquared's wholesale LTE plans – a potential major competitor for Clearwire – "it's been good to see the tides turn" in Clearwire's favor, Cochran said.

Operators could add capacity through expensive techniques like cell splitting, but Cochran says it could be cheaper to just piggyback on Clearwire's network.

"We try to hit that sweet spot where it's less expensive to roam with us" than to build-out more capacity, she said.

Sprint and prepaid provider Cricket Communications have already signed up for Clearwire's still-un-built TD-LTE service, which will be used to augment their own LTE services.

Clearwire is trying to land contracts with other wireless providers beyond the first two it has signed up for its LTE network.

Looking at forecasts of skyrocketing data growth, Cochran said: "I only need a small market share for my economic model to work, and that's what I'm focused on."

Clearwire is fresh from a recent funding round and is on sound financial footing for the time being, but it has struggled to stay solvent in the past. It has repeatedly had to tap the equity markets and ask Sprint – its largest shareholder – for funding. Sprint’s most recent cash infusion provided Clearwire with a total of about $1.6 billion.

Additional agreements could help shore up Clearwire’s financial footing. It recently landed deals with two former LightSquared customers: FreedomPop and Simplexity.

Meanwhile, Clearwire is seeing firsthand the rise in data traffic forecast by industry experts. It reports that traffic on its WiMAX network grew 705 percent between the fourth quarter of 2010 and the fourth quarter of 2011.

Some of the increase was attributed to a rise in Clearwire's subscriber base, but "a lot of the growth is from the fact that those subscribers are utilizing more," Cochran said.

Clearwire plans to have its first 5,000 TD-LTE base stations online around the middle of next year and expects to eventually extend the network to a total of 8,000 sites, about half of the 16,000 base stations deployed for its WiMAX service.

Sprint currently uses Clearwire's WiMAX network to provide its subscribers with mobile broadband service, but it plans to phase out its WiMAX use in favor of its own LTE service, set to launch in 10 markets before the middle of this year.